What is a defining feature of a decreasing term policy?

A decreasing term policy is characterized by having a death benefit that decreases over the term of the policy. This type of policy is designed for specific needs, such as covering a mortgage balance as it decreases over time. One of the defining features is that it typically has no cash value associated with it, meaning the policyholder does not accumulate any savings component that could be accessed or borrowed against. Additionally, like many term insurance policies, it is designed to cover individuals for a specific period and will expire at the end of that term if the insured does not pass away.

This feature distinguishes it from other forms of life insurance that might build cash value or provide options for conversion. Since the coverage amount diminishes, there is also no automatic conversion to a whole life policy involved in a decreasing term policy. Understanding these traits is essential for recognizing how different life insurance policies meet diverse financial planning needs.